Chinese Consumer Report 2012 - Luxury - Roland Berger

Luxury market capacity in different tier cities
Luxury market penetration and average spending in
different tier cities
Population [million]
Average spending
[thousand/year]
Penetration of luxury
goods: first-tier, secondtier,
third-tier, fourth-tier
Number of cities
Source: 2011 Roland Berger’s Chinese Luxury Consumers Survey (n=1,393), industry interviews; Roland Berger analysis
58 key battlefield cities for Chinese luxury brand market
spending power
Battlefield for
luxury goods
consumer spending power
third-tier
Total spending in luxury goods
in different tier cities
[100 million]
fourth-tier
Key battlefield for luxury companies
first-tier
second-tier
Source: 2011 Roland Berger’s Chinese Luxury Consumers Survey (n=1,393), China City Statistical Yearbook, National
Development and Reform Commission, Yearbook of China Retail Corporations in Chain; Roland Berger analysis
#city
Spending on
luxury goods
Population (million)
City Luxury brand
population consumers
population
Key battlefield
coverage
#city
City
population
Target
consumer
group of
luxury goods
Spending on
luxury goods
Broaden the core market for marketing
There is untapped potential for sales in China's
luxury goods segment. Although most luxury
companies have opened stores in China's first
and/or second-tier cities, buyers from third
and fourth-tier cities account for nearly 40%
of total sales. This proportion is expected to
further increase in the future.
Consumers from second-tier cities have
contributed a higher percentage of sales than
those from first-tier cities. Consumers from
third and fourth-tier cities together have also
contributed a higher percentage than those in
first-tier cities.
In our view, there are many key battlefield
cities for luxury companies in China. As it
is unrealistic to cover all third and fourthtier
cities, we have identified the key cities
of the luxury market through our proprietary
model, which is based on spending power and
economic scale.
In this model, which follows the 80/20 rule,
we aimed to cover the largest luxury goods
consumer population with the fewest number
of cities. According to our model, 70% of luxury
goods consumers can be reached by covering
58 cities. Leading international brands have
not yet reached this coverage level. In the near
future, the growth of China's luxury market
will still be driven by store expansion from
multinational luxury companies.
Low-tier market coverage by international
luxury goods companies is still low but
considerable market capacity exists for
network growth.
The key question for international luxury brands
is how to effectively reach that large pool of
potential buyers in third and fourth-tier cities.
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